Board Meeting—12/8/2020

The TVA Retirement System Board of Directors (Board) held its quarterly meeting December 8, 2020, virtually via WebEx with business conducted through the Board’s Investment, Audit, Retirement and Election committees. All current TVARS Board directors were present: Brian Child, Chair; Mike Belcher, Marilyn Brown, Eric Davis, Sam DeLay, Jim Hovious and Tina Wallace.

This was the first Board meeting for Marilyn Brown, who was unanimously selected to serve as the 7th Director retiree on the TVARS Board for the remainder of the current term for the position that runs through October 31, 2021.

Following nominations, the Board voted on officers for new three-year terms that will run through December 2023 and elected Brian Child to serve as Chair of the Board and Sam DeLay to serve as Vice-Chair of the Board.

Investment Committee Highlights:

The Investment Committee met on December 4, 2020. Wilshire Associates, the System’s investment consultant, and TVARS staff discussed with the Committee the performance of the pension fund investments. Assets values have rebounded from $7.0 billion at the end of March to the current estimated value of $8.4 billion as of December 2, 2020.

This was the first Committee meeting for Mercer Investments as the System’s new defined contribution plan consultant. After team introductions, Mercer and the TVARS staff discussed with the Committee and agreed on a vision to evolve the 401(k) Plan from a savings plan to a true retirement plan for TVA employees, retirees and beneficiaries. This discussion also included various goals for the 401(k) Plan that include providing employees with a way to save for retirement that also assists them with a successful transition into retirement, focusing on the overall financial wellness of employees with a desire for employees to remain in the 401(k) Plan upon retirement, and addressing the needs of a diverse employee population.

In addition to addressing the vision and goals for the 401(k) Plan, Mercer Investments also covered investment performance and fees of the 401(k) Plan fund line-up and provided a comprehensive governance review that included 401(k) Plan statistics, governance process, and regulatory, legal and legislative updates. Asset values for the 401(k) Plan continue to grow and are estimated to be $3.3 billion at the end of November 2020.

At the Board meeting, four Investment Committee items related to the pension fund investments were approved:

  • Additional funding for the PIMCO Income Fund as a permanent capital allocation into multi-sector credit;
  • Selection of Brevet Capital, a government focused specialty lender, as a new investment manager of the System, as a part of the System’s multi-sector credit investment allocation;
  • Consolidating investment managers in the midstream energy infrastructure asset class and changing the benchmark of the manger and asset class; and
  • Fund extensions for three Adams Street Partners 2005 private equity funds in which the System is a limited partner investor.

Election Committee Highlights:

The Election Committee discussed the 2020 election and the Board voted to accept the 2020 election results from Election-America, the System’s election provider, with Sam DeLay receiving 55 percent of the vote. Director DeLay’s new term will run from November 1, 2020, through October 31, 2023.

Audit Committee Highlights:

The TVARS staff, along with the System’s external auditor, Crowe LLP, presented the results of the 2020 Service Organization Control (SOC1) Report, which contained an unqualified opinion indicating that TVARS controls were suitably designed and operating effectively. At the Board meeting, upon the recommendation of the Audit Committee, the Board approved an engagement letter with Crowe LLP to perform the 2021 SOC1examination.

Retirement Committee Highlights:

The Board approved 1.13% cost-of-living adjustment (COLA) for eligible retirement benefits for 2021 as calculated under the TVARS Rules and Regulations (“TVARS Rules”).

The TVARS Rules provide that eligible retirement benefits (pension and supplemental benefits) will receive a COLA based on an inflation measure, which is the Consumer Price Index – All Urban Consumers (CPI-U) – an index maintained by the U.S. Labor Department that measures the price changes in a broad group of various goods and services purchased by consumers. Under the TVARS Rules, the COLA is calculated as the percentage change in the average CPI-U for the period of November 2018 – October 2019 to the period November 2019– October 2020 (1.38%) minus 0.25%. Eligible retirees and beneficiaries will see the increase in checks beginning January 31, 2021.

The TVARS Board also approved the interest crediting rates for 2021 as calculated under the TVARS Rules. Cash balance (pension) accounts receive interest credits on a monthly basis and Fixed Fund (annuity) accounts receive interest credits on a daily basis and the annual interest crediting rates are set for each calendar year according to the TVARS Rules.

For employees with cash balance accounts who were hired prior to January 1, 1996, the interest crediting rate for 2021 will be 6% – the calculation is equal to the change in the CPI-U (1.38%) plus 3% but not less than 6%.

For employees with cash balance accounts who were hired on or after January 1, 1996, the interest crediting rate for 2021 will be 4.75% – the calculation is equal to the change in the CPI-U (1.38%) plus 2%, but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.

For Fixed Fund accounts, the interest crediting rate for 2021 will be 4.75% – the calculation is equal to the change in the CPI-U (1.38%) plus 2%, but not less than the TVARS assumed rate of investment return (6.75%) minus 2%.

Questions

Anyone with questions may contact TVARS by e-mail at retsvcs@tva.gov or by phone at 865-632-2672, or 800-824-3870.